Confused about stocks lately? We explain whiplash

new York
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After months of steady gains, stocks are rebounding as investors renew their process. Trade tensions between the United States and China.

Stocks were mixed Tuesday in volatile trading: The Dow gained 203 points, or 0.44%, after falling 615 points earlier. The S&P 500 fell 0.16%. The tech-heavy Nasdaq closed down 0.72% after falling as much as 2.1% during the session.

Tensions between the world’s two largest economies have reignited with punitive measures. The prospect of a trade war has injected uncertainty into global markets, sending technology and chip stocks tumbling and weighing on investors’ outlook.

As traders try to gauge whether the trade feud will escalate, stocks fluctuate and pause. their rise of several months.

“Market participants were hoping that the worst of the China-US trade conflict would be in the past,” Lee Hardman, senior currency analyst at Japanese bank MUFG, said in a note on Monday.

Tensions were initially reignited after China unveiled a new rare earth export controls and US President Donald Trump threatened a new 100% rate the day after.

The exchanges continued: Beijing announced sanctions Tuesday against five U.S. subsidiaries of South Korean shipping giant Hanwha Ocean, and it is also reviewing a U.S. government trade investigation into China’s maritime sector.

Trump said Tuesday via Truth Social that China is committing an “economically hostile act” by “deliberately not purchasing our soybeans.” American soybean farmers have faced a lack of demand of China in the context of the trade war.

Investors fear a resurgence in the U.S.-China trade war could fuel inflation and increase the risk of an economic slowdown, according to Sam Stovall, chief investment strategist at CFRA Research.

“With the trade war back in the spotlight, I think investors have a lot more reason to be concerned,” Stovall said.

The unrest comes ahead of a planned meeting between Trump and Chinese leader Xi Jinping in APEC Summit in South Korea at the end of October.

Wall Street’s fear index, the VIX, jumped 31% on Friday – its biggest one-day gain since April – before falling 12% on Monday.

The VIX gained 9% on Tuesday after briefly rising as much as 20% and reaching its highest level since May. These fluctuations are emblematic of rising uncertainty and increasing geopolitical risks.

“The VIX is like the pulse of the market,” Stovall said. “At present, due to new concerns, this pace has accelerated. »

Technology stocks have contributed to the recovery this year, but they are sensitive to trade tensions. The AI ​​boom relies on the Chinese market for sales, while trade tensions could also disrupt it. chip manufacturing supply chains.

NVIDIA (NVDA), the largest company in the S&P 500 by market value, was caught in the line of fire of the trade conflict between the United States and China. Nvidia fell 4.4% on Tuesday.

The technology and chip sectors could see short-term volatility amid ongoing trade negotiations, according to Ulrike Hoffmann-Burchardi, global head of equities at UBS.

Meanwhile, shelters like gold And money are on the rise – another sign that investors are hedging against geopolitical instability.

The S&P 500 is up 33% over six months. The actions are historically expensive as concerns grow over an AI bubble.

At the same time, Wall Street strategists say stocks have more room to run, with strong corporate profits and Federal Reserve rate cuts supporting the recovery.

Even though stocks have fallen due to recent trade concerns, some investors are also buying that dip, helping to support the market.

“We remain cautiously optimistic that (the United States and China) will ultimately reach a negotiated solution,” Hoffmann-Burchardi said.